The Spring 2022 edition of the Primax Payments Pulse found continued, strong consumer purchasing activity, despite ongoing inflationary pressures.
In April 2022, the Bureau of Labor Statistics (BLS) reported the unemployment rate was unchanged from March at 3.6%, with job growth led by gains in Leisure and Hospitality, Manufacturing, and Transportation and Warehousing. This combination of strong job growth and low unemployment will likely further fuel consumer spending – even as wage increases due to low labor supply continue to spur inflation. We expect to see the impact of rising inflation influence consumer card preferences (credit versus debit), as well as sector activity.
Worldwide energy prices continue to rise as the war in Ukraine enters its fourth month, creating the largest refugee crisis in Europe since World War II. A proposed ban of Russian oil and China resuming production activities from its current COVID shutdown could impact gasoline prices well into 2023.
In the two months since the data in this report has been published, we have continued to see massive changes worldwide. As we closely monitor the rapidly evolving state of our economy, we hope the insights from this special report, featuring a Deep Dive into Mobile Wallets, will help our financial institutions make informed decisions as the year continues.
Kay takeaways from our Spring report, as well as relevant updates since that time, include:
- The Consumer Price Index (CPI-U) hit a 40-year high in March at 8.5% and moderated slightly to 8.3% in April – the first drop in the CPI in eight months. The CPI-U went back up to 8.6% during the month of May. With inflation above 6% since October 2021, the Fed increased interest rates by 50 basis points in May, followed by a 75-basis-point increase in June – it’s largest rate hike since 1994 – to help counterbalance the highest inflation in 40 years. A pause in the series of aggressive rate hikes is unlikely until inflation returns to an acceptable level.
- Consumer spending on cards remains strong, with year-to-date April credit purchases up 22% and debit purchases up 6% year over year. Contributing to the lower growth in debit was exceptional spend in 2021 funded by the second and third economic stimulus payments. The Entertainment sector posted top growth rates for credit and debit purchases in the January to April timeframe. For credit purchases, Travel was a close second and Gasoline was third. For debit purchases, Gasoline was second, with Travel a close third. Since then, we’ve seen the Gasoline sector experiencing the top growth rates in both credit and debit as fuel prices have continued to surge.
- Mobile Wallets continue to show strong growth, with notable growth coming from younger generations. For Gen Z (19- to 23-year-olds), Mobile Wallet transactions for year-to-date 2022 were up 155% for credit and 107% for debit year over year. The importance in being top of wallet in their mobile device for this age group is growing, as Mobile Wallet transactions now represent 6.2% of Card Present debit activity and 3.8% of Card Present credit activity. The top three mobile wallets (Apple Pay, Google Pay and Samsung Pay) represented 99% of the Mobile Wallet transactions, with usage and growth in Mobile Wallet activities skewed toward the younger generations, providing insight into continued growth of this payment channel. The Restaurant sector represented the largest percentage of Mobile Wallet transactions for both credit and debit in April, with 35% for credit card Mobile Wallet transactions and 42% for debit card Mobile Wallet transactions.
- Gasoline prices hit a 14-year high in March at $4.32 per gallon, a 49% increase from March 2021. Gas purchases at Automated Fuel Dispensers (AFDs) were up 63% for credit and 42% for debit year over year for the January to April timeframe. The year-to-date 2022 average AFD purchase was $44.66 on credit cards and $41.81 for debit cards. The Gasoline sector growth will continue to grow in June, with fuel prices surpassing $5 per gallon.
Looking Ahead
As consumer preferences and behaviors continue to evolve, Primax continues to keep a pulse on consumer spending and trends in order to deliver timely, relevant insights. We hope that these insights will help our financial institutions continue to make informed, strategic decisions.
Brian Scott partners with industry leaders in payments and community financial institutions to create competitive payments programs, helping financial institutions position themselves competitively in their own communities and maintain profitability throughout their payments programs. Brian spent 23 years in the highly competitive consumer payments marketplace and is a recognized leader in payments solutions and innovative technologies. He is a frequent speaker on the future of payments, new payments trends, mobile banking, alternative payments, and how new payments technologies will transform the current banking space.
